The Indian Pharmaceutical Industry in Post-TRIPS and Post-Product Patent Regime: A Group-wise Analysis of Relative Efficiency Using Nonparametric Approach

Aas Mohammad and Bandi Kamaiah

The IUP Journal of Applied Economics, 2014, vol. XIII, issue 1, 47-61

Abstract: This paper is an attempt to examine the technical efficiency of Indian pharmaceutical industry over the period of 1997-2011 using a nonparametric technique, Data Envelopment Analysis (DEA). The study is carried out for all the selected firms as well as for groups which have been formed on the basis of size, expenditure on R&D, product varieties and other characteristics. The evidence shows that investment in R&D can substantially influence the efficiency of pharmaceutical firms. It is also observed that firms producing only bulk drugs exhibit higher efficiency as compared to the firms producing only formulations. The study also finds that there is a positive association between the size of firms and their technical efficiencies. One of the interesting findings of the study is that prior to the product patent regime, the industry was witnessing a gradual fall in its mean efficiency level, while after 2005, i.e., post-product patent regime, an increasing trend in the level of efficiency in almost all groups of firms has been observed.

Date: 2014
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